HMO licenses are issued by local councils and can be renewed for up to five years, if approved. HMO licenses are issued for each property, not each landlord. A landlord who has three HMO properties would need a license for each one.
HMOs that are valued based on rental income will not be valued by all lenders. Most lenders will consider the HMO to have the same value as a standard home. This can affect the amount of money you can borrow.
HMO mortgage rates are generally higher than those for standard buy-to-let mortgage products. HMO mortgage rates are higher because there is less competition in the market for HMO mortgages. HMO lenders will be more willing to lend money, but they will charge higher rates and fees. However, an HMO's income should be sufficient to pay for a mortgage, maintenance, and utility bills.
When assessing the property's value, lenders may take into account the rental income. This is especially beneficial if you have converted the property or are looking to withdraw equity.
HMOs with no license may not qualify for an HMO mortgage. Lenders may instead consider a buy-to Ð let mortgage.
HMO Buy to Let4 bedroom semi detached house with 2 receptions rooms1 reception room converted into a bedroomRents to 5 single-working professionalsMonthly renting income per tenant = PP400Monthly renting income = PP2000Annual rental revenue = PL24,000. The above example illustrates why HMO property owners are more interested in them. The difference in gross rent income can be very significant.
HMO properties can generate higher yields than other types of property, but they are also more difficult to set-up. HMO licences may be required for landlords, depending on the nature and purpose of the HMO.